National Association of Home Builders Discusses Economics and Housing Policy

Homeowners Contribute to Growth of Peer Lending

Peer-funded lending for personal and business loans has registered robust growth in recent years. Moreover, between 2007 and the third quarter of 2015, the composition of borrowers shifted from largely renters to a majority of homeowners. Not only do homeowners represent the majority of borrowing, but the median borrowed amount funded exceeds the median borrowed amount obtained by renters. At the same time, the average interest rate paid by homeowners is typically less than that of renters.

An earlier post illustrated that homeowners account for 60% of all loans funded through peer-to-peer lending site LendingClub.com. However, homeowners did not always account for the majority of borrowers. In 2007, the first year of data, homeowners represented 43% of all funded loan amounts and the rest of the loans were obtained by non-homeowners. The vast majority of non-homeowners, 99.9% are renters. The other 0.1% reported their homeownership status as “other” or “none”.

By 2010, more than half of all borrowers were considered homeowners. The share of all borrowers considered homeowners continued to rise until 2013 when it reached 62%. Since 2013, the proportion of borrowers considered homeowners has ticked down slightly, but still accounts for approximately 3 out of every 5 loans.

Not only do homeowners account for the majority of loans, but individual homeowners tend to borrow in larger amounts. Figure 2 presents the median funded amount by homeowner status. According to the figure, the median funded amount has risen for both homeowners and renters, however, the median amount borrowed by homeowners is greater than the amount borrowed by renters in every year that data is available.

At the same time, the median interest obtained by homeowners tends to be less than the median rate that renters receive. Figure 3 shows the median interest by homeowner status. In 2007, the median interest rate on loans obtained by homeowners was equal to the interest rate obtained by renters. However, in each subsequent year, the interest rate on loans obtained by homeowners was less than that of renters.